Central Banks
ECB Cuts Set to Become Trickier Once Key Rate Falls to Near 3%
- Friction likely over inflation outlook, level of neutral rate
- Markets are pricing two or three more reductions this year
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Decisions at the European Central Bank are set to get a lot more contentious once interest rates fall to about 3% and clashes emerge over what’s still needed to keep inflation in check, according to people familiar with the matter.
While the next two or three reductions in the deposit rate from its current level of 3.75% are unlikely to cause major friction, the debate will then encounter differing views of both the price outlook and the point where monetary policy stops restraining economic growth, the people said, asking not to be identified as the discussions are private.